Robots don’t take lunch breaks, but they don’t spend money either

Outside the Eco-chamber

In the last five years, India’s working-age population, or individuals over the age of 15, has gone up by about 118 million. This means, on average, every year in those five years, some 23.6 million individuals have crossed the age of 15.

Of course, everyone who crosses the age of 15 doesn’t necessarily go into the workforce, seeking to earn a living. Some of them continue to study; many women get married and are forced to drop out of the labour force.

Assuming even just 40% of the people entering working age are looking for a job, close to 9.5 million Indians would have entered the job market every year, on average over the last five years. At 50%, 11.8 million individuals would have done so. In other words, a million Indians are entering the workforce every month.

The fact that India hasn’t been producing enough jobs can be gauged from the high unemployment rates prevailing among the youth. Data from the Centre for Monitoring Indian Economy shows that as of February 2021, 48.5% of individuals in the age bracket 15-19 were unemployed; and so were 39.2% of those in the age group 20-24.

Of course, it is not just the lack of jobs. Ask any HR manager and you will be told that there is a major problem on the skills front. Clearly, as a country, we have a big problem on our hands. Our so-called demographic dividend is sinking.

What makes the problem even graver is the automation risk to jobs. In fact, as Daniel Susskind writes in A World Without Work – Technology, Automation and How We Should Respond: ‘Automation risk’ is the percentage of jobs in an economy that, in the OECD’s opinion, have a greater than 70% chance of being automated. (OECD is an Organisation for Economic Cooperation and Development).

All kinds of jobs at different levels are being automated. Susskind provides a long list in his book about driverless tractors, cow-milking machines, cattle-herding drones, tree-shaking robots that harvest oranges, sprayers that drop fertiliser on crops, bricklaying robots, algorithms that can write news stories, machines that can compose sophisticated music which sounds like a symphony, and so on.

The larger point here is that the threat of automation has gone way beyond being confined to factories. In manufacturing itself, too, robots and automation are now an even more important part than was the case in the past.

As Susskind writes: “Robots now account for 80% of the work undertaken in manufacturing a car. Nor is this only a story about cars. McKinsey & Co. estimate that, as of 2015, 64% of worker hours in all areas of manufacturing were spent on tasks that could be automated with existing technologies – never mind the future ones.”

Also, the automation risk as per OECD is higher in poorer countries. As Susskind writes: “The sorts of tasks that OECD considers to be the easiest to automate are disproportionately found in poorer countries.”

And India is a poor country. In fact, when it comes to factories, the Indian entrepreneur has long preferred to expand by buying and installing new machines rather than hiring human workers. The rate of capital expansion in India has been much faster than the rate of labour expansion. Hence, the creation of new jobs in the formal space in India will continue to slowdown in the years to come. Also, our recent focus on big business is not going to help, given that most jobs are created by small businesses growing bigger.

This means, the model that the world followed until now where countries grew their manufacturing sector significantly to draw themselves out of poverty, may not be available to India at all.

As Cambridge University economist Ha-Joon Chang writes in Bad Samaritans—The Guilty Secrets of Rich Nations & the Threat to Global Prosperity: “History has repeatedly shown that the single most important thing that distinguishes rich countries from poor ones is basically their higher capabilities in manufacturing, where productivity is generally higher, and more importantly, where productivity tends to grow faster than agriculture and services.”

Robots and automation will create problems of a different kind in the western world where prosperity has been achieved. The question that needs to be asked here is, what keeps capitalism going? The simple answer is: Consumption. People work. They get paid money. This money is used to buy goods and services. This keeps corporations in business, which in turn employ people and pay them.

If more and more jobs are automated, this entire dynamic will break down. Corporates prefer automation for the simple reason that they don’t have to deal with and pay human beings and the problems that come with it. Also, this increases their profits.

But, while robots may not take lunch breaks, they don’t earn money and spend it either. The point is, if human beings don’t earn and spend money, what will keep corporations going? Who will buy the stuff their robots will produce? This is a question well worth asking.

This could possibly lead to governments taxing corporates in the western world at higher rates. And the money could then be used to pay a universal basic income (UBI) to everyone. While UBI might partly solve the dynamic at the heart of capitalism, nevertheless it doesn’t do anything about the sense of meaning and identity that a job provides to individuals.